Gaz de France profit rises 44%

Utility ups forecasts following sharp rise in exploration and development profit

By

SimonKennedy

LONDON (MarketWatch) -- French utility Gaz de France on Tuesday reported a 44% jump in net income and upped its earnings forecast on the back of a sharp rise in profit at its exploration and production unit.

The group said net income for the first half was 1.71 billion euros ($2.17 billion), or 1.74 euros a share, up from 1.19 billion euros, or 1.32 euros a share, a year ago.

Total sales for the period rose 37% to 15.23 billion euros.

Analysts at UBS said the firm's net income was well ahead of the consensus and its own forecast of 1.1 billion euros.

Shares in Gaz de France (GAZ), rose 2.1% in Paris.

The firm said it now sees its 2006 net profit exceeding 2.2 billion euros, up from its previous guidance for profit to exceed 2 billion euros.

Gaz de France also said it expects earnings before interest, tax, depreciation and amortization to average 10% growth from 2005 to 2008. The company had previously said it expected growth to average between 4% and 7%.

The exploration and production division spearheaded growth, with EBITDA rising 91% to 635 million euros due to growth in production and an increase in gas selling prices.

Mark Lewis, an analyst at Deutsche Bank said in a note to clients that Gaz de France's energy sales and purchasing division had outperformed expectations, with EBITDA in the unit rising 46% to 641 million euros, compared to Deutsche Bank's forecast of 205 million euros.

UBS analysts attributed the unit's performance to a reduction in stock. Gaz de France said performance was helped by growth in natural gas volumes sold in France and Europe.

Profit from the firm's French distribution and storage divisions rose by around 2%. EBITDA from international transmission and distribution more than doubled to 355 million euros from 165 million euros a year ago, in part due to the integration of its Distrigaz Sud divisions operations in Romania with those of SPE in Belgium.

Gaz de France, which has agreed to merge with French-Belgian utility Suez
SZE
faced other problems Tuesday as staff staged demonstrations and walk-outs.

The protests are in opposition to the government's plan to sharply cut its stake in the utility as the first stage of its eventual merger with Suez.

The firm is also facing calls for an improved deal from investors in Suez, which itself reported a roughly 40% rise in net profit earlier this month.

Gaz de France CEO Jean-François Cirelli said his firm's results reaffirmed his view that the terms of the deal did not need to be improved.

Under the deal, Suez shareholders will receive one Gaz de France share on top of a one euro-a-share special dividend for every Suez share they own.

Suez shares climbed 2.2% in Belgium, in line with the rise in Gaz de France shares.

Intraday Data provided by SIX Financial Information and subject to terms of use. Historical and current end-of-day data provided by SIX Financial Information. All quotes are in local exchange time. Real-time last sale data for U.S. stock quotes reflect trades reported through Nasdaq only. Intraday data delayed at least 15 minutes or per exchange requirements.